Ever since Jack Dorsey, founder of Twitter, sold his first tweet for $2.5 million in March 2021 and artist Beeple auctioned his digital art collection for $70 million, there has been incessant buzz about non-fungible tokens (NFTs). What are they, why are people selling and buying them suddenly and how can they be used in brand marketing? We take a look.
What is an NFT?
An NFT or non-fungible token is a digital collectible, a one-of-a-kind asset that can’t be replicated. Like bitcoin they are created using blockchain technology and they have unique identification codes and metadata to distinguish them from each other.
So how do they differ from bitcoin? Bitcoin is to NFTs what bank notes are to artwork. With physical bank notes, it doesn’t matter which actual bank note you own because within their range they are all worth the same value. With artwork it very much does matter which one you own because each has its own individual value, and the same is true of NFTs.
NFTs can be anything digital. The first use cases have been from the music world (Canadian musician Grimes auctioned a collection of 10 NFTs and made $6 million in 20 minutes; Kings of Leon released special editions of their most recent album as an NFT before it came out on general release) and the art world. NFTs are designed to give the purchaser ownership of the work (though the artist can still retain the copyright and reproduction rights).
Why are NFTs useful for brands?
Marketers are taking note. NFTs are useful because they are a hot craze and are generating global interest and press attention. Not only this, but they are helping brands to drive brand awareness, raising money for good causes and increasing customer interaction. Through ownership of exclusive NFTs, collectors can feel a deeper sense of connection with their favourite brands, which translates into increased customer loyalty.
How are brands using NFTs?
US fastfood chain Taco Bell debuted its NFTacoBell collection earlier this year, 25 total pieces of crypto-art which sold out in 30 minutes. Original prices were set at $1, the price of a taco, but the reselling of the NFTs increased some of the prices to more than $3,600. With each resell, Taco Bell earns 0.1% in royalties, which is donated to the Taco Bell Foundation. With more customers than ever expecting their brands to support good causes, the Taco Bell example shows how a brand can use NFTs to raise money for charity and show purpose.
Increasing fan engagement
In April 2021 McDonalds France teased a social media contest where followers could win a series of NFTs representing iconic menu items. The fast-food giant announced the release of the first two NFTs—representing a box of Chicken McNuggets and the famous Big Mac—first in an Instagram post, accompanied by the hashtag "#McDoNFT". It was followed by a Twitter post the next week, announcing two more McDonald's NFTs–sundae and fries. There are five copies of each work, making a total of 20 works, which followers can win on social media. At the time of writing (15th April), the Instagram post had generated over 7k likes and Twitter 4k likes with over 1k shares.
Generating customer loyalty through a one-of-a-kind collector’s edition
Luxury brands are also looking for a piece of the action. In April 2021, luxury watch brand Jacob & Co. auctioned off a one-of-a-kind NFT created by Jacob & Co.’s internal design team. It included all the physical accoutrements that come with a high-end watch, like a certificate of ownership and a case, but also a hard drive with the NFT — a digital rendering of a Jacob & Co. watch. The NFT was intended for collectors and investors looking to invest in a one-of-a-kind piece, according to the brand. It fetched $100,000 at auction. This example shows that there is a market for people who are brand super fans and want to spend their money to feel closer to a company or a product.
Producing exclusive, tradable collectables
The National Basketball Association (NBA) wanted to take the country’s nostalgia and passion for trading basketball cards and bring it into 2021 through NFTs. Instead of owning a physical card, it is now possible to own a digital NBA highlight. Packs are priced based on rarity – there are only a few packs in existence with iconic stars and shots, whereas more packs are produced with regular players and games. Through scarcity, brand value and exclusivity, and playing on the customer’s desire for nostalgia, the NBA has created a thrilling concept. As of 24 February 2021, NBA NFTs had surpassed US$200 million in sales with more than 65,000 buyers involved.
NFTs – Challenges and the Future
NFTs present very exciting possibilities for marketers. They are great for creating memorable experiences for customers and they are also an excellent way of engaging with and interacting with a target audience.
The technology is however in its infancy and developers will need to address environmental and storage concerns. The current system for cryptocurrency and NFT transactions is massively unsustainable from an environmental perspective (one cryptocurrency transaction is estimated to consume as much energy as 700,000 Visa transactions). There are also concerns about storage. After an NFT is purchased, the content is not stored on the blockchain but stored on a server, leaving it open to the chance that it could inadvertently be deleted. Brands also need to proceed with care and keep in mind that NFTs started as a grassroots movement to enable creators to monetise their work directly with their fans. Blatant money or publicity grabs by brands will not be rewarded by this community.
As for the future, many observers predict more marketing use cases will emerge, particularly in generating customer loyalty and greater transparency and authenticity. For example, fashion brands could embed an NFT ticket to a fashion show in 10 randomly-selected clothing items or luxury products could have NFTs embedded which track an expensive item’s purchase history so that when it is resold, the buyer would know exactly who the item had belonged to previously. The same technology could be used to prevent the sale of counterfeits. Trust is a high priority for consumers so these use cases will be worth exploring.
One thing is for sure – blockchain and NFT technology is here to stay and marketers should start thinking now about how to integrate this technology in their digital marketing strategy.